In August Congress enacted the massive Pension Protection Act of 2006. While primarily a pension reform law, the Act contains a number of provisions pertaining to public charities and charitable contributions. Most notably, the Act imposes new requirements on the substantiation of charitable contributions. These requirements take effect immediately, and must be understood by church treasurers in order to ensure that donors will be able to deduct their cash contributions.
This article will address 10 provisions in the new law of special relevance to church treasurers.
1. Tax-free distributions from IRAs for charitable purposes
IRA owners who are least 70 1/2 years of age can make tax-free distributions of up to $100,000 from a traditional IRA or a Roth IRA to a tax-exempt church or charity. This provision is effective through 2007.
2. Charitable deduction for contributions of food inventory
Any taxpayer engaged in a trade or business is eligible to claim an enhanced deduction for donations of food inventory. The total deduction for donations of food inventory in a given year generally may not exceed 10 percent of the taxpayer's net income for the year from all business entities from which contributions of "apparently wholesome food" are made. This provision is effective for contributions made in 2006 and 2007.